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Actionable news in CAH: CARDINAL HEALTH Inc,

Cardinal Health Reports Strong THIRD-QUARTER RESULTS FOR FISCAL YEAR 2016

The following excerpt is from the company's SEC filing.

21 percent

increase in revenue to

$30.7 billion

20 percent

increase in non-GAAP

operating earnings to

$788 million

increase in non-GAAP diluted earnings per share to

Revised range of $5.17 to $5.27 for fiscal 2016 non-GAAP diluted earnings per share

DUBLIN, Ohio,

- Cardinal Health today reported third-quarter results for fiscal year

, including a

and a

increase in non-GAAP operating earnings to

. Non-GAAP diluted earnings per share (EPS) increased

. On a GAAP basis, operatin g earnings increased

11 percent

$656 million

, and diluted EPS increased

7 percent

“We had a strong financial and operational performance in our fiscal third quarter. At the same time, we continued to enhance and grow enterprise-wide service and product lines, which are important to our customers and address some of health care’s most difficult challenges,” said George Barrett, chairman and chief executive officer of Cardinal Health. “We delivered double-digit growth in revenue and profit in both our Pharmaceutical and Medical reporting segments and had very solid performance across our lines of business.”

The company tightened the range for its fiscal 2016 non-GAAP diluted earnings per share guidance to $5.17 to $5.27 from the prior range of $5.15 to $5.35.

Q3 FY16

SUMMARY

Q3 FY15

Revenue

billion

Operating earnings

million

Non-GAAP operating earnings

Net earnings attributable to Cardinal Health, Inc.

Non-GAAP net earnings attributable to Cardinal Health, Inc.

Diluted EPS attributable to Cardinal Health, Inc.

Non-GAAP diluted EPS attributable to Cardinal Health, Inc.

SEGMENT RESULTS

Pharmaceutical Segment

Third-quarter revenue for the Pharmaceutical segment increased

22 percent

$27.5 billion

due to growth from new and existing customers as well as acquisitions.

Strong performance from both acquisitions and new and existing customers significantly contributed to segment profit growth of

16 percent

$660 million

Segment profit

Medical Segment

Third-quarter revenue for the Medical segment increased

13 percent

$3.1 billion

due to the net contribution from acquisitions as well as solid growth from existing businesses.

Segment profit increased

26 percent

$128 million

due to the contribution from acquisitions, net of divestitures, and from Cardinal Health-branded products. Segment profit includes the $21 million negative impact of the Cordis-related inventory fair value step-up.

ADDITIONAL

THIRD-QUARTER

AND RECENT HIGHLIGHTS

Announced agreement to acquire Curaspan Health Group Inc., a leader in discharge planning and care transitions technology for hospitals, health systems and post-acute providers

Recognized as one of the Top Companies for Female Executives by the National Association for Female Executives

Launched Cardinal Health MedSync Advantage™, a custom-built medication synchronization program to help community pharmacists improve medication adherence and patient outcomes and increase pharmacy efficiency

Announced winners of the sixth annual Generation Rx awards, recognizing student pharmacists from across the country and a clinical professor of pharmacy for their ongoing efforts to help prevent prescription medication misuse

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss third-quarter results. To access the call and corresponding slide presentation, go to ir.cardinalhealth.com. Alternatively, participants can call 913.312.1411 and use passcode 4332927.

There is no pre-registration for the call. Participants are advised to dial into the call at least 10 minutes prior to the start time.

Presentation slides and a webcast replay will be available on the Cardinal Health website at ir.cardinalhealth.com.

UPCOMING WEBCASTED INVESTOR EVENTS

William Blair’s 36

Annual Growth Stock Conference on June 15 at 8 a.m. Central in Chicago

At the event, Cardinal Health executives will discuss the company's diverse products and services, company performance and strategies for continued growth. To access more details and a live webcast of this event, go to ir.cardinalhealth.com.

About Cardinal Health

Cardinal Health, Inc. (NYSE: CAH), a global health services and products company, brings scaled solutions that help our customers thrive in a changing world. We improve the cost-effectiveness of healthcare through solutions that improve the efficiency of the supply chain; optimize the process and performance of healthcare; provide clinically proven, daily use medical products and pharmaceuticals; and connect patients, providers, payers, pharmacists and manufacturers for seamless care coordination and better patient management. Backed by nearly 100 years of experience, we rank among the top 50 on the

Fortune

500 and among the

Global 100. We support our partners with more than 37,000 employees in nearly 60 countries worldwide. For more information, visit

www.cardinalhealth.com

@CardinalHealth

on Twitter.

Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, financial information, earnings and analyst presentations, and information about upcoming presentations and events is routinely posted and accessible at ir.cardinalhealth.com. In addition, the website allows investors and other interested persons to sign up automatically to receive e-mail alerts when the company posts news releases, SEC filings and certain other information on its website.

See the attached tables for definitions of the non-GAAP financial measures presented in this news release and reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures.

Cautions Concerning Forward-Looking Statements

This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive pressures in Cardinal Health's various lines of business; the frequency or rate of pharmaceutical price appreciation or deflation and the timing of generic and branded pharmaceutical introductions; the ability to continue to achieve and maintain the benefits from the generic sourcing venture with CVS Health and from the acquisitions of Cordis and The Harvard Drug Group; the risk of non-renewal or a default under one or more key customer or supplier arrangements or changes to the terms of or level of purchases under those arrangements; uncertainties due to government health care reform, including federal health care reform legislation; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; and changes in foreign currency rates and the cost of commodities such as oil-based resins, cotton, latex and diesel fuel. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This news release reflects management's views as of

. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.

Schedule 1

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

Third Quarter

(in millions, except per common share amounts)

% Change

30,662

25,375

Cost of products sold

28,973

23,916

Gross margin

Operating expenses:

Distribution, selling, general, and administrative expenses

Restructuring and employee severance

Amortization and other acquisition-related costs

Impairments and (gain)/loss on disposal of assets

Litigation (recoveries)/charges, net

Other (income)/expense, net

Interest expense, net

Earnings before income taxes

Provision for income taxes

Less: Net earnings attributable to noncontrolling interests

Net earnings attributable to Cardinal Health, Inc.

Earnings per common share attributable to Cardinal Health, Inc.:

Weighted-average number of common shares outstanding:

Schedule 2

Year-to-Date

90,162

74,983

85,285

70,729

Loss on extinguishment of debt

Schedule 3

Condensed Consolidated Balance Sheets (Unaudited)

(in millions)

March 31,

June 30,

Assets

Current assets:

Cash and equivalents

Trade receivables, net

Inventories, net

10,910

Prepaid expenses and other

Total current assets

22,291

21,752

Property and equipment, net

Goodwill and other intangibles, net

Other assets

Total assets

34,055

30,142

Liabilities, Redeemable Noncontrolling Interests, and Shareholders’ Equity

Current liabilities:

Accounts payable

17,340

14,368

Current portion of long-term obligations and other short-term borrowings

Other accrued liabilities

Total current liabilities

19,385

17,243

Long-term obligations, less current portion

Deferred income taxes and other liabilities

Redeemable noncontrolling interests

Total Cardinal Health, Inc. shareholders' equity

Noncontrolling interests

Total shareholders’ equity

Total liabilities, redeemable noncontrolling interests, and shareholders’ equity

Schedule 4

Condensed Consolidated Statements of Cash Flows (Unaudited)

Cash flows from operating activities:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

Gain on sale of other investments

Impairments and (gain)/loss on disposal of assets, net

Share-based compensation

Provision for bad debts

Change in fair value of contingent consideration obligation

Change in operating assets and liabilities, net of effects from acquisitions:

Increase in trade receivables

Decrease/(increase) in inventories

(1,457

Increase in accounts payable

Other accrued liabilities and operating items, net

Net cash provided by operating activities

Cash flows from investing activities:

Acquisition of subsidiaries, net of cash acquired

(3,383

Additions to property and equipment

Purchase of available-for-sale securities and other investments

Proceeds from sale of available-for-sale securities and other investments

Proceeds from maturities of available-for-sale securities

Proceeds from divestitures and disposal of held for sale assets

Net cash used in investing activities

(3,681

Cash flows from financing activities:

Payment of contingent consideration obligation

Net change in short-term borrowings

Purchase of noncontrolling interests

Reduction of long-term obligations

(1,221

Proceeds from long-term obligations, net of issuance costs

Net proceeds/(tax withholdings) from share-based compensation

Excess tax benefits from share-based compensation

Dividends on common shares

Purchase of treasury shares

Net cash used in financing activities

Effect of exchange rate changes on cash and equivalents

Net increase/(decrease) in cash and equivalents

(2,018

Cash and equivalents at beginning of period

Cash and equivalents at end of period

Schedule 5

Total Company Business Analysis

Amount

Growth rate

Gross Margin

Return on equity

Effective tax rate

Debt to total capital

Net debt to capital

GAAP gross margin includes the negative impact of a $12 million LIFO charge in the third quarter of fiscal 2016 ($51 million year-to-date).

Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.

Schedule 6

Segment Business Analysis

27,527

22,605

Segment profit margin

Segment profit includes a $21 million impact from the roll-out of the inventory fair value step up related to the Cordis acquisition for the three months ended March 31, 2016. Excluding the impact of the inventory fair value step up, Medical segment profit would have increased 47% for the three months ended March 31, 2016.

Refer to definitions for an explanation of calculations.

Total consolidated revenue for the three months ended

March 31, 2016

$30,662 million

, which included total segment revenue of

$30,665 million

and Corporate revenue of

$(3) million

. Total consolidated revenue for the three months ended

March 31, 2015

$25,375 million

$25,379 million

$(4) million

. Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments.

Total consolidated operating earnings for the three months ended

were

, which included total segment profit of

and Corporate costs of

$(132) million

. Total consolidated operating earnings for the three months ended

$591 million

$669 million

$(78) million

. Corporate includes, among other things, LIFO (charges)/credits, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net, and certain investment spending that are not allocated to the segments.

Schedule 7

80,954

66,440

Segment profit includes a $43 million impact from the roll-out of the inventory fair value step up related to the Cordis acquisition for the nine months ended March 31, 2016. Excluding the impact of the inventory fair value step up, Medical segment profit growth would have been 14% for the nine months ended March 31, 2016.

Total consolidated revenue for the nine months ended

$90,162 million

$90,174 million

$(12) million

. Total consolidated revenue for the nine months ended

$74,983 million

$74,980 million

$3 million

. Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments.

Total consolidated operating earnings for the nine months ended

$1,839 million

$2,280 million

$(441) million

. Total consolidated operating earnings for the nine months ended

$1,603 million

$1,889 million

$(286) million

. Corporate includes, among other things, LIFO charges/(credits), restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.

Schedule 8

GAAP / Non-GAAP Reconciliation

Net Earnings

Before

Income

Growth Rate

Third Quarter 2016

Third Quarter 2015

Year-to-Date 2016

Year-to-Date 2015

The sum of the components may not equal the total due to rounding.

We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.

Schedule 9

GAAP return on equity

Non-GAAP return on equity

LIFO charges/(credits), net of tax

Restructuring and employee severance, net of tax

Amortization and other acquisition-related costs, net of tax

Litigation (recoveries)/charges, net, net of tax

Adjusted net earnings attributable to Cardinal Health, Inc.

Annualized

Second

Divided by average Cardinal Health, Inc. shareholders' equity

Schedule 10

Impairments and (gain)/loss on disposal of assets, net of tax

Loss on extinguishment of debt, net of tax

Fourth

Schedule 11

GAAP effective tax rate

Non-GAAP effective tax rate

Adjusted earnings before income taxes

LIFO charges/(credits) tax benefit

Restructuring and employee severance tax benefit

Amortization and other acquisition-related costs tax benefit

Impairments and (gain)/loss on disposal of assets tax benefit/(expense)

Litigation (recoveries)/charges, net tax benefit/(expense)

Loss on extinguishment of debt tax benefit

Adjusted provision for income taxes

(2,598

(3,183

Capital

Forward-Looking Non-GAAP Financial Measures

We present non-GAAP net earnings attributable to Cardinal Health, Inc. and non-GAAP effective tax rate (and presentations derived from these financial measures, including per share calculations) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are net earnings attributable to Cardinal Health, Inc. and effective tax rate. We are unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because we cannot reliably forecast LIFO charges/(credits), restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net, and loss on extinguishment of debt, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact our future financial results.

Use of Non-GAAP Measures

This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the measures exclude items and charges that (i) management does not believe reflect Cardinal Health, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.

Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.

Definitions

: long-term obligations plus short-term borrowings.

Debt to Total Capital

: debt divided by (debt plus total Cardinal Health, Inc. shareholders’ equity).

Net Debt

: a Non-GAAP measure defined as debt minus (cash and equivalents).

Net Debt to Capital

: a Non-GAAP measure defined as net debt divided by (net debt plus total Cardinal Health, Inc. shareholders’ equity).

Non-GAAP Diluted EPS attributable to Cardinal Health, Inc. or "Non-GAAP Diluted EPS" or "Non-GAAP Diluted Earnings Per Share"

: non-GAAP net earnings attributable to Cardinal Health, Inc. divided by diluted weighted-average shares outstanding.

Non-GAAP Diluted EPS from continuing operations

: non-GAAP earnings from continuing operations divided by diluted weighted-average shares outstanding.

Non-GAAP Effective Tax Rate

: (provision for income taxes adjusted for (1) LIFO charges/(credits)

, (2) restructuring and employee severance

, (3) amortization and other acquisition-related costs

, (4) impairments and (gain)/loss on disposal of assets

, (5) litigation (recoveries)/charges, net

, and (6) loss on extinguishment of debt

) divided by (earnings before income taxes adjusted for the same six items).

Non-GAAP Gross Margin

: Gross margin excluding LIFO charges/(credits).

Non-GAAP Net Earnings attributable to Cardinal Health, Inc. or "Non-GAAP Net Earnings"

: net earnings attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) restructuring and employee severance, (3) amortization and other acquisition-related costs, (4) impairments and (gain)/loss on disposal of assets, (5) litigation (recoveries)/charges, net, and (6) loss on extinguishment of debt, each net of tax.

Non-GAAP Earnings from Continuing Operations

: earnings from continuing operations excluding (1) LIFO charges/(credits), (2) restructuring and employee severance, (3) amortization and other acquisition-related costs, (4) impairments and (gain)/loss on disposal of assets, (5) litigation (recoveries)/charges, net, and (6) loss on extinguishment of debt, each net of tax.

Non-GAAP Operating Earnings

: operating earnings excluding (1) LIFO charges/(credits), (2) restructuring and employee severance, (3) amortization and other acquisition-related costs, (4) impairments and (gain)/loss on disposal of assets, and (5) litigation (recoveries)/charges, net.

Non-GAAP Return on Equity

: (annualized current period net earnings attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) restructuring and employee severance, (3) amortization and other acquisition-related costs, (4) impairments and (gain)/loss on disposal of assets, (5) litigation (recoveries)/charges, net, and (6) loss on extinguishment of debt, each net of tax) divided by average Cardinal Health, Inc. shareholders’ equity.

: annualized current period net earnings attributable to Cardinal Health, Inc. divided by average Cardinal Health, Inc. shareholders’ equity.

Segment Profit

: segment revenue minus (segment cost of products sold and segment distribution, selling, general, and administrative expenses).

Segment Profit Margin

: segment profit divided by segment revenue.

The inventories of the Company's core pharmaceutical distribution facilities in the Pharmaceutical segment are valued at the lower of cost, using the LIFO method, or market. These charges or credits are included in cost of products sold, and represent changes in the Company's LIFO inventory reserve.

Programs by which the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, employee severance (including rationalizing headcount or other significant changes in personnel), and realigning operations (including realignment of the management structure of a business unit in response to changing market conditions).

Costs that consist primarily of amortization of acquisition-related intangibles assets, transaction costs, integration costs, and changes in the fair value of contingent consideration obligations.

Asset impairments and (gains)/losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and (gain)/loss on disposal of assets within the condensed consolidated statements of earnings.

Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters.

Charges related to the make-whole premium on the redemption of notes.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Cardinal Health director was just granted 59 restricted shares - April 18, 2016